The Boeing Company (NYSE: BA) reported fourth-quarter revenue of $23.8 billion and core earnings per share (non-GAAP) that increased 29 percent* to $1.88, driven by strong performance across the company's businesses and higher deliveries (Table 1). Fourth-quarter core operating earnings (non-GAAP) of $1.8 billion includes a $406 million non-cash charge to settle A-12 litigation dating back to 1991, retiring a longstanding risk to the company. Excluding the A-12 charge, fourth-quarter 2013 core operating earnings increased 22 percent* to $2.2 billion and core operating margin increased to 9.4 percent*. Core and GAAP earnings per share includes a charge of $0.34 per share related to A-12 partially offset by a benefit of $0.28 per share for a tax regulation change.

Revenue rose 6 percent in the full year to a record $86.6 billion and core earnings per share increased 20 percent* to a record $7.07. Full-year 2013 GAAP earnings per share was $5.96.

Core earnings per share guidance for 2014 is set at between $7.00 and $7.20, while GAAP earnings per share guidance is established at between $6.10 and $6.30. Revenue guidance is between $87.5 and $90.5 billion, including commercial deliveries of between 715 and 725. Operating cash flow before pension contributions* is expected to be approximately $7 billion, while operating cash flow guidance is set at approximately $6.25 billion.

"Strong fourth-quarter results underscored an outstanding full year of core operating performance that drove record revenue and earnings and increased returns to shareholders," said Boeing Chairman and Chief Executive Officer Jim McNerney.

"Our Commercial Airplanes business accelerated delivery of its record backlog by successfully increasing production rates while also achieving important development milestones on the 737 MAX and 787-9 and launching the new 787-10 and 777X models with an unprecedented customer response. Our Defense, Space & Security unit overcame a tough operating environment to record expanded revenue, earnings and margins while executing to our commitments on the KC-46A tanker and developing and delivering important new capabilities to customers, such as the P-8 maritime aircraft and the Inmarsat-5 satellite," said McNerney.

"For 2014, we remain focused on maintaining our commercial airplanes market leadership, strengthening and repositioning our defense, space and security business and continuing to meet the needs of our customers by improving productivity, executing to development plans and delivering our unmatched portfolio of innovative aerospace products and services."

Table 2. Cash Flow

Fourth Quarter

Full Year

(Millions)

2013

2012

2013

2012

Operating Cash Flow Before Pension Contributions*

$1,409

$4,204

$9,721

$9,058

Pension Contributions

($29)

($37)

($1,542)

($1,550)

Operating Cash Flow

$1,380

$4,167

$8,179

$7,508

Less Additions to Property, Plant & Equipment

($638)

($495)

($2,098)

($1,703)

Free Cash Flow*

$742

$3,672

$6,081

$5,805

Operating cash flow in the quarter was $1.4 billion, reflecting commercial airplane production rates, strong core operating performance and timing of receipts and expenditures (Table 2). During the quarter, the company repurchased 7.6 million shares for $1.0 billion and paid $0.4 billion in dividends, reflecting a 10 percent increase in dividends paid compared to the same period of the prior year. Based on the strong cash generation and outlook, in December, the board of directors authorized an additional $10 billion share repurchase program and raised the quarterly dividend 50 percent.

Table 3. Cash, Marketable Securities and Debt Balances

Quarter-End

(Billions)

Q4 13

Q3 13

Cash

$9.1

$10.0

Marketable Securities1

$6.2

$5.9

Total

$15.3

$15.9

Debt Balances:

The Boeing Company, net of intercompany loans to BCC

$7.0

$7.0

Boeing Capital Corporation, including intercompany loans

$2.6

$2.6

Total Consolidated Debt

$9.6

$9.6

1

Marketable securities consists primarily of time deposits due within one year classified as "short-term investments."

Cash and investments in marketable securities totaled $15.3 billion at year-end (Table 3), down from $15.9 billion at the beginning of the quarter. Debt was $9.6 billion, unchanged from the beginning of the quarter.

Total company backlog at year-end was a record $441 billion, up from $415 billion at the beginning of the quarter, and included net orders for the quarter of $48 billion. Backlog is up $51 billion from prior year-end, reflecting $135 billion of net orders in 2013.

During the quarter, the company launched the 777X with 259 orders and commitments. During the year, the 787 program completed first flight of the 787-9, successfully launched the 787-10 and began operating at a 10 per month production rate in final assembly. The 737 program delivered at a record production rate of 38 per month and has won nearly 1,800 firm orders for the 737 MAX since launch. In 2013, a record 648 commercial aircraft were delivered. In January 2014, the company reached an eight-year contract extension through 2024 with the International Association of Machinists & Aerospace Workers District 751 (IAM).

Commercial Airplanes booked 465 net orders during the quarter and 1,355 during the year. Backlog remains strong with 5,080 airplanes valued at a record $374 billion.

At quarter-end, Boeing Capital Corporation's (BCC) net portfolio balance was $3.9 billion down from $4.1 billion at the beginning of the quarter. BCC's debt-to-equity ratio was 5.0-to-1. Other segment earnings decreased $130 million in the quarter partly due to higher asset impairment expense.

Unallocated items and eliminations excluding unallocated pension/postretirement expense increased in the fourth quarter of 2013 primarily due to a $406 million charge associated with the A-12 settlement. Total pension expense for the fourth quarter was $717 million, up from $576 million in the same period last year. The company's income tax expense was $201 million in the quarter, compared to $557 million in the same period of the prior year, due to a $212 million benefit recorded in fourth-quarter 2013 for a tax regulation change.

Boeing's 2014 revenue guidance is established at between $87.5 and $90.5 billion. Core earnings per share guidance is set at between $7.00 and $7.20, and earnings per share guidance is expected to be between $6.10 and $6.30. Total company 2014 operating cash flow before pension contributions is expected to be approximately $7 billion, while operating cash flow is expected to be approximately $6.25 billion in 2014, including $0.75 billion of discretionary pension contributions. Total company pension expense in 2014 is expected to be approximately $3.1 billion (of which approximately $2.0 billion is expected to be recorded in core operating earnings and $1.1 billion recorded in unallocated items and eliminations).

Commercial Airplanes' 2014 deliveries are expected to be between 715 and 725, which includes approximately 110 787 deliveries. Revenue at Commercial Airplanes is expected to be between $57.5 and $59.5 billion with operating margins of approximately 10 percent. Defense, Space & Security's revenue for 2014 is expected to be between $30 and $31 billion with operating margins of approximately 9.5 percent.

Boeing Capital Corporation expects that its aircraft finance portfolio will continue to decline in 2014, as new aircraft financing of less than $0.5 billion is expected to be lower than normal portfolio runoff through customer payments and depreciation. Boeing's 2014 R&D forecast is approximately $3.2 billion, and capital expenditures for 2014 are expected to be approximately $2.5 billion. Boeing's effective tax rate is expected to be approximately 31 percent in 2014, which assumes the extension of the research and development tax credit.

Non-GAAP Measures Disclosures

We supplement the reporting of our financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial information. The non-GAAP financial information presented excludes certain significant items that may not be indicative of, or are unrelated to, results from our ongoing business operations. We believe that these non-GAAP measures provide investors with additional insight into the company's ongoing business performance. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. The following definitions are provided:

Core operating earnings is defined as GAAP earnings from operations excluding unallocated pension and post-retirement expense. Core operating margin is defined as core operating earnings expressed as a percentage of revenue. Core earnings per share is defined as GAAP diluted earnings per share excluding the net earnings per share impact of unallocated pension and post-retirement expense. Unallocated pension and post-retirement expense represents the portion of pension and other post-retirement costs that are not recognized by business segments for segment reporting purposes. Management uses core operating earnings, core operating margin and core earnings per share for purposes of evaluating and forecasting underlying business performance. Management believes these core earnings measures provide investors additional insights into operational performance as they exclude unallocated pension and post-retirement costs, which primarily represent costs driven by market factors and costs not allocable to government contracts. A reconciliation between the GAAP and non-GAAP measures is provided on page 14.

The company is disclosing the core operating margin and the increase in core operating earnings in the fourth quarter of 2013 over the fourth quarter of 2012 excluding the A-12 settlement charge in the fourth quarter of 2013. Management believes it is useful to occasionally exclude certain items that are not reflective of underlying performance and that can distort period to period performance comparisons. Management uses similar measures for purposes of evaluating and forecasting underlying business performance. A reconciliation between the GAAP and non-GAAP measures is provided on page 14.

Free cash flow is defined as GAAP operating cash flow less capital expenditures for property, plant and equipment additions. Management believes free cash flow provides investors with an important perspective on the cash available for shareholders, debt repayment, and acquisitions after making the capital investments required to support ongoing business operations and long term value creation. Free cash flow does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures such as repayment of maturing debt. Management uses free cash flow as a measure to assess both business performance and overall liquidity. Table 2 provides a reconciliation between GAAP operating cash flow and free cash flow.

Caution Concerning Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "may," "should," "expects," "intends," "projects," "plans," "believes," "estimates," "targets," "anticipates," and similar expressions are used to identify these forward-looking statements. Examples of forward-looking statements include statements relating to our future financial condition and operating results, as well as any other statement that does not directly relate to any historical or current fact. Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties, and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are risks related to: (1) general conditions in the economy and our industry, including those due to regulatory changes; (2) our reliance on our commercial airline customers; (3) the overall health of our aircraft production system, planned production rate increases across multiple commercial airline programs, our commercial development and derivative aircraft programs, and our aircraft being subject to stringent performance and reliability standards; (4) changing acquisition priorities of the U.S. government; (5) our dependence on U.S. government contracts; (6) our reliance on fixed-price contracts; (7) our reliance on cost-type contracts; (8) uncertainties concerning contracts that include in-orbit incentive payments; (9) our dependence on our subcontractors and suppliers, as well as the availability of raw materials, (10) changes in accounting estimates; (11) changes in the competitive landscape in our markets; (12) our non-U.S. operations, including sales to non-U.S. customers; (13) potential adverse developments in new or pending litigation and/or government investigations; (14) customer and aircraft concentration in Boeing Capital's customer financing portfolio; (15) changes in our ability to obtain debt on commercially reasonable terms and at competitive rates in order to fund our operations and contractual commitments; (16) realizing the anticipated benefits of mergers, acquisitions, joint ventures/strategic alliances or divestitures; (17) the adequacy of our insurance coverage to cover significant risk exposures; (18) potential business disruptions, including those related to physical security threats, information technology or cyber-attacks or natural disasters; (19) work stoppages or other labor disruptions; (20) significant changes in discount rates and actual investment return on pension assets; (21) potential environmental liabilities; and (22) threats to the security of our or our customers' information.

Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Any forward-looking statement speaks only as of the date on which it is made, and we assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.

Contact:

Investor Relations:

Troy Lahr or Matt Welch (312) 544-2140

Communications:

Chaz Bickers (312) 544-2002

The Boeing Company and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

Twelve monthsended December 31

Three monthsended December 31

(Dollars in millions, except per share data)

2013

2012

2013

2012

Sales of products

$76,792

$71,234

$21,482

$19,793

Sales of services

9,831

10,464

2,303

2,509

Total revenues

86,623

81,698

23,785

22,302

Cost of products

(65,640)

(60,309)

(18,610)

(17,206)

Cost of services

(7,553)

(8,247)

(1,758)

(1,816)

Boeing Capital interest expense

(75)

(109)

(20)

(24)

Total costs and expenses

(73,268)

(68,665)

(20,388)

(19,046)

13,355

13,033

3,397

3,256

Income from operating investments, net

214

268

67

57

General and administrative expense

(3,956)

(3,717)

(1,100)

(943)

Research and development expense, net

(3,071)

(3,298)

(848)

(753)

Gain/(loss) on dispositions, net

20

4

(1)

7

Earnings from operations

6,562

6,290

1,515

1,624

Other income, net

56

62

15

23

Interest and debt expense

(386)

(442)

(96)

(112)

Earnings before income taxes

6,232

5,910

1,434

1,535

Income tax expense

(1,646)

(2,007)

(201)

(557)

Net earnings from continuing operations

4,586

3,903

1,233

978

Net loss on disposal of discontinued operations, net of taxes of $0 and $2

(1)

(3)

Net earnings

$4,585

$3,900

$1,233

$978

Basic earnings per share from continuing operations

$6.03

$5.15

$1.63

$1.29

Net loss on disposal of discontinued operations, net of taxes

Basic earnings per share

$6.03

$5.15

$1.63

$1.29

Diluted earnings per share from continuing operations

$5.96

$5.11

$1.61

$1.28

Net loss on disposal of discontinued operations, net of taxes

Diluted earnings per share

$5.96

$5.11

$1.61

$1.28

Cash dividends paid per share

$1.94

$1.76

$0.485

$0.44

Weighted average diluted shares (millions)

769.5

763.8

768.4

768.3

The Boeing Company and Subsidiaries

Consolidated Statements of Financial Position

(Unaudited)

(Dollars in millions, except per share data)

December 31 2013

December 31 2012

Assets

Cash and cash equivalents

$9,088

$10,341

Short-term and other investments

6,170

3,217

Accounts receivable, net

6,546

5,608

Current portion of customer financing, net

344

364

Deferred income taxes

14

28

Inventories, net of advances and progress billings

42,912

37,751

Total current assets

65,074

57,309

Customer financing, net

3,627

4,056

Property, plant and equipment, net of accumulated depreciation of $15,070 and $14,645

The tables provided below reconcile the non-GAAP financial measures core operating earnings, core operating margin and core earnings per share as well as core operating margin and the increase in core operating earnings excluding the A-12 settlement charge with the most directly comparable GAAP financial measures, earnings from operations, operating margin and diluted earnings per share. See page 7 of this release for additional information on the use of these non-GAAP financial measures.